FoE Malaysia calls on Malaysian Government to address negative impacts of its overseas foreign direct investment

23 June, 2014

Friends of the Earth Malaysia/ Sahabat Alam Malaysia

Although the outflow of Malaysian investments abroad has been more than the inflow of investments into the country, serious concerns have arisen about the impact of the palm oil industry in particular.

In the first quarter of 2012, the total overseas investment outflow totalled RM16.91 billion, more than double the inflow of RM7.48 billion (US$5.1 billion). The Malaysian palm oil industry represents a modest amount of the total overseas foreign direct investment (OFDI) value. However, the industry’s adverse impacts are significant compared to any other sector that Malaysian companies invest in because of the development of plantation estates, especially in tropical forests, community land and peatlands in other countries.

For several years, civil society organisations and government review committees in countries with Malaysian overseas investment in the palm oil sector have raised serious legal, environmental and social justice concerns.

Recently, Friends of the Earth Malaysia/ Sahabat Alam Malaysia commissioned Aidenvironment to conduct a study to assess the scale of Malaysian overseas FDI in oil palm plantation land banks, and to illustrate why global and local stakeholders question the industry’s good reputation.

This study has identified fifty Malaysian companies that have acquired over 200 plantation companies with a total overseas oil palm plantation land banks of 3.5 million hectares. The dominant recipient of Malaysian FDI in oil palm land banks is Indonesia (52%), followed by Papua New Guinea (PNG) (31%) while other third countries account for the remaining 17%.

The focus of the report is on key sustainability concerns associated with Malaysian overseas FDI. More than a dozen case studies in the report have shown that Malaysian overseas oil palm investment commonly involves a variety of legal and unethical practices, including:

Unauthorised occupation of protected forestland, and other forms of illegal logging

Land clearing and plantation development without approved environmental impact assessments or other required permits, and misleading government authorities about this

Pursuing legal claims and occupation of customary rights land without free, prior and informed consent of indigenous communities

Paying local villagers and plantation workers for hunting protected species, such as orang-utans.

Further, on 20 May 2014, a High Court in Papua New Guinea declared two large land development leases claimed by a Malaysian based company Kuala Lumpur Kepong Berhad (KLK) in the Collingwood Bay region of PNG, null and void. The Court had ordered the State to cancel the title deeds.[1] This is but one case of many in countries like PNG, Indonesia and Liberia involving Malaysian based companies and local communities.

These malpractices have often resulted in intense conflicts between Malaysian investors and local stakeholders. This study found that the heads of state in Indonesia, PNG, Liberia and Congo (Br) with Malaysian palm oil FDI have declared investment moratoria in order to control overseas investment in forestry and/or agriculture development.

In essence, this does not augur well for Malaysia’s reputation and image or its ambitions to be a global leader in the palm oil sector.

Friends of the Earth Malaysia/ Sahabat Alam Malaysia urges the Government to study this report carefully and recognise the negative impacts of these overseas investments on local communities and the environment.

Closer to home, Singapore may be a good example to emulate as it has proposed new and unique legislation that would hold its citizens and businesses legally accountable for involvement in the recurrent transboundary haze problem.

SAM calls for strict mandatory regulations for Malaysian OFDI including having companies respect the rule of law in countries they operate in, refrain from engaging in activities that are against universal human rights principles and stop environmental degradation. Further, companies that violate these mandatory regulations should be punished severely to ensure no repeats by others.